On financial markets, the upward slope that lasted two months between mid-June and mid-August has reversed. Indexes seem to be slipping gently rather than rolling down the stairs on their butts, but the declines are piling up.

There are mornings like this when I'd better go fishing so as not to shower you with bad news. I've been digging around a lot to find some good news to tell, but I think I failed miserably. Even yesterday's surprisingly strong August US service sector data didn't sway Wall Street, which saw it as another indication that the US central bank would maintain a restrictive policy to cool down overheating prices. The famous "good news, bad news" that I sometimes mention here.

However, U.S. stocks pretended to rebound yesterday after a three-day weekend, but the good mood didn't last more than a few minutes. Indexes plunged early in the session before attempting a few forays higher, only to close lower. The Nasdaq 100 returned to the 12,000-point mark and the S&P 500 to the 3,900-point mark. Fans of round numbers will no doubt see some chartist opportunities, but the backdrop is still particularly bleak. Moreover, investors always seem to give in to short-termist impulses that make sectoral variations look like Christmas trees. Yesterday, it was clearly consensual to bet on real estate, airlines and solar energy. And to burn some oil and technology stocks.

In Europe, financial markets continue to show resistance despite energy apocalypse news that fill headlines. European investors are betting on a vigorous response from the EU, which is expected to announce a set of responses to rising energy prices by the end of the week. When all options are exhausted, it is once again the government that the market turns to. It is worth noting that despite the European energy chaos, the STOXX Europe 600 has been catching up with the S&P 500 since the beginning of August. Go figure.

For the rest, and if we disregard the sectoral mishap in equities that I mentioned earlier, the evolution of major financial groups is rather coherent. Risk aversion favors the dollar as a safe haven of last resort. The Dollar Index, which measures the strength of the dollar against a basket of six other currencies, has exceeded 110 points for the first time since the spring of 2002. U.S. government bond yields continued to rise, with a 10-year maturity paying 3.34% this morning, a sign that the Fed's determination to raise rates in order to curb inflation is well within the market's grasp. Shorter maturities seem to be converging, which is surely a sign of something, but I haven't had time to check what. At the same time, this double dollar/bond effect is pushing the ounce of gold below USD 1700. As for oil, it is falling due to recession fears, despite OPEC+'s efforts to keep it high.

We are not in earnings season, so we have to look elsewhere for news. There will be Apple's little back-to-school party to present its new products. And public speeches by two Fed central bankers, Dove Brainard and Hawk Mester. The publication of the latest Fed Beige Book will complete the set-up This document is a compilation of regional economic trends from the twelve Fed districts (Atlanta, Boston, Chicago, Cleveland, Dallas, Kansas City, Minneapolis, New York, Philadelphia, Richmond, St. Louis and San Francisco). It's not the most decisive release out there, but given the Fed's importance now, it could be influential. This morning, China reported fairly significantly lower-than-expected import-export numbers for August, adding to the big collection of headwinds I've just listed.



Today's Economic Highlights

In Europe, German industrial production, revised GDP and employment data for Q2 are on today's agenda. In the US, we have trade balance and the Fed's Beige Book.

Gold is down to USD 1693. Oil is crumbling, with North Sea Brent crude at USD  91.48 per barrel and U.S. light crude WTI at USD 85.33. The yield on 10-year US debt rose sharply to 3.35%, with shorter maturities trending toward convergence. Bitcoin fell below USD 19,000.

 

In corporate news:

Apple introduces its new iPhones today.

Repsol sells oil assets in Alberta to Teine Energy.

PetroChina signs a gas deal with Russia's Gazprom.

AIG launches IPO of its life and asset management division at a discount.

Holcim completes the sale of its Brazilian operations.

Honda sets up a company in China with Dongfeng and Guangzhou Auto to source batteries for electric vehicles.

Salvatore Ferragamo reports an 85% jump in net profit for the first quarter.

Google will launch the Pixel Watch and Pixel 7 on October 6.

Nissan is buying a Japanese electric battery specialist.

Finnair to reduce its fleet as part of its new strategy.

DKSH enters into a distribution agreement with Lupin in the Philippines.

Mercedes lays off 3,600 workers in Brazil.

Baker Hughes will simplify its organization into two units.

 

Analyst recommendations:

Amazon: Phillip Securities downgrades to neutral from buy. PT up 5.5% to $133.

AstraZeneca: Morgan Stanley moves from Overweight to Equal-weight with a GBp 12,000 target.

Dice Therapeutics: Stifel starts at Buy With $37 Price Target

Glencore: Credit Suisse still considers the stock as a Buy opportunity. The target price has been raised to GBp 720 from GBp 570.

Morphic: Stifel Starts Morphic at Buy With $44 Price Target.

Phoenix Group: Morgan Stanley moves from Equal-Weight to Underweight, targeting GBp 660.

Prudential: UBS advises its customers to buy the stock. The target price is reduced from GBp 1685 to GBp 1580.